Opinion
A147418
04-17-2017
LOANVEST I, LLC, Plaintiff and Appellant, v. PAUL F. UTRECHT et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG12654982)
This case comes before us for the third time. In the first appeal, we reversed the dismissal of plaintiff's complaint against Paul F. Utrecht and Utrecht & Lenvin, LLP (collectively, Utrecht) under the "anti-SLAPP" statute (Code Civ. Proc., § 425.16) on the ground that plaintiff's malpractice complaint against Utrecht does not threaten to chill the exercise of protected First Amendment rights so that the first prong of the anti-SLAPP analysis was not satisfied. (Loanvest I, LLC v. Utrecht (2015) 235 Cal.App.4th 496.) We expressly concluded our opinion with the observation that "[t]he many reasons for which the trial court concluded that the claim lacks merit must await consideration on a motion for summary judgment or other appropriate proceedings." (Id. at p. 505.) In the second appeal we reversed the dismissal of plaintiff's claim for conversion and restitution against Ropers Majeski Kohn Bentley, PC (Ropers), entered after sustaining Ropers' contention that the claim was barred by a two-year statute of limitations, on the ground that the action was timely under the applicable three-year statute of limitations. (Loanvest I, LLC v. Ropers Majeski Kohn Bentley, PC (Jan. 12, 2016, A144977) [nonpub. opn.].) We again had no occasion to consider the merits of plaintiff's claims.
Subsequently the trial court granted summary judgment against four groups of defendants. Settlements have been reached with two of those groups. Before us now is plaintiff's appeal from the summary judgments granted in favor of Utrecht and in favor of another law firm, Wendel, Rosen, Black & Dean LLP (Wendel Rosen). Although the summary judgments in favor of these parties were granted on multiple grounds, both judgments must be upheld after considering only a limited number of issues. For different reasons we shall affirm both judgments.
Background
The factual background of this litigation is exceptionally convoluted. In short, Utrecht has been sued for malpractice by Loanvest, now under the control of James Madow, for allegedly disregarding the interests of Loanvest in order to protect the interests of the person who formerly controlled Loanvest in an action that Madow himself brought against Loanvest and its former manager. Utrecht defended Loanvest in resisting Madow's attempt to prevent Loanvest from paying legal fees to Wendel Rosen, which represented the former manager in the prior litigation, and to Utrecht. Loanvest also seeks to recover from Wendel Rosen the fees which it allegedly knew it had no right to receive from Loanvest.
More fully, the following facts are largely undisputed. In 2008, Loanvest had a single member, South Bay Real Estate Commerce Group, LLC (South Bay), which was managed by Scott Carter, a relative of George Cresson and, subsequently, by Cresson. In 2008, Carter, on behalf of South Bay, signed an "operating agreement" naming South Bay as Loanvest's manager and providing that anyone purchasing a membership interest in Loanvest would have no voting or management rights, and that the manager could be removed only for breach of fiduciary duty and by a super-majority vote of Loanvest's members. In 2009, Madow purchased a 70 percent interest in, and became a member of, Loanvest.
In November 2011, Madow added Loanvest and South Bay as defendants in an action he had filed in February 2011 against other entities allegedly owned and controlled by Cresson. This action, referred to as the "San Francisco action" (Madow v. Post Construction Services, LP et al. (Super. Ct. S.F. City and County, 2011, No. CGC-11-508188)), asserted several claims against Cresson and entities Cresson allegedly controlled, including Loanvest. The claim arose, in part, out of a complex series of transactions involving a loan from Loanvest to Post Construction Services, allegedly "Cresson's personal holding company," secured by an interest in certain real property in Oakland. Wendel Rosen represented South Bay in that action. Utrecht represented Loanvest and successfully opposed Madow's motion for a preliminary injunction that would have prevented Loanvest from paying out of the proceeds of the sale of Loanvest's interest in the Oakland property "more than $300,000 . . . to discharge 'Loanvest I expenses,' the 'vast majority' of which was paid to Cresson's lawyers in the San Francisco action," and "more than $100,000" to other attorneys "for legal services totally unrelated to South Bay's activities as Loanvest['s] manager."
On May 1, 2013, a partial settlement agreement was reached in the San Francisco action. The terms of the agreement are set out in the resulting judgment, which among other things adjudicated Madow's claims against Cresson and others in favor of those defendants and directed that Post Construction Services refund monies to Madow, and in the transcript of proceedings incorporated in the judgment. The transcript reflects the agreement that Madow "will be appointed manager of Loanvest I, LLC, effective five days from the date of notice of entry of dismissal with prejudice, served by overnight delivery to all counsel." The request for dismissal was filed and served on May 1, 2013.
On May 3, 2013, Loanvest, by Cresson on behalf of South Bay as manager of Loanvest, entered a settlement agreement and release with Utrecht, under which Utrecht agreed to reduce the amount of fees assertedly owed by Loanvest and to release any claims it might have against Loanvest, and Loanvest "release[d] and forever discharge[d] [Utrecht] from any and all claims, liens, demands, causes of action, obligations, damages, expenses and liabilities of any kind whatsoever, whether at this time suspected, known or unknown, that they have in the past or now have against them. This release is intended to include claims based on prior errors and omissions of [Utrecht] that might be alleged to have been legal malpractice, but not to claims based on any future actions or omissions of [Utrecht]."
It is undisputed that at least as of May 6, 2013, South Bay was replaced by Madow as the manager of Loanvest pursuant to the settlement agreement in the San Francisco action. With Madow in control, Loanvest brought the present action. The amended complaint in this case alleges that South Bay, wrongfully purporting to have remained the manager of Loanvest after Madow removed it in June 2011, and wrongfully claiming that Loanvest was contractually obligated to indemnify South Bay, caused Loanvest to pay, out of Loanvest's proceeds from the Oakland transaction, legal fees owed by South Bay to Wendel Rosen for its representation of South Bay in the San Francisco action. Loanvest alleges that Wendel Rosen knew that it had "no right to take possession of Loanvest I assets to discharge South Bay's obligations for which Loanvest I bore no legal responsibility."
In the amended complaint, Loanvest also alleges that in successfully opposing Madow's motion for a preliminary injunction in the San Francisco action, "Utrecht never represented Loanvest['s] interests, instead egregiously breaching the duty of loyalty owed to his purported client" and aided his "true client," Cresson, in "looting" Loanvest to pay Cresson's obligations, including the obligation to pay attorney fees to Wendel Rosen. Utrecht allegedly did so by taking "the position that the outstanding . . . legal bills owed by South Bay (i.e., Cresson) in connection with the San Francisco action were the legal responsibility of his purported client, Loanvest I, notwithstanding" the fact that South Bay's claim for indemnity from Loanvest I was "patently" without merit.
In granting the several summary judgments in this action, the trial court noted preliminarily, "This litigation involves a dispute among two individuals, namely James Madow, the present manager of Loanvest, and George Cresson, former manager of Loanvest (through his control of South Bay Real Estate Commerce Group, LLC.) [¶] . . . [¶] . . . Defendant Wendel Rosen successfully defended Loanvest/South Bay against Madow's claims in the San Francisco action. [¶] . . . Defendant Utrecht also represented Loanvest (but here in this litigation defendant is alleged to have actually been representing Cresson—in that Utrecht also defeated Madow in litigation against Loanvest before this action)."
The court gave three reasons for granting summary judgment in favor of Utrecht. "[T]he undisputed facts show that Loanvest's claim against Utrecht is barred by the underlying settlement and South Bay had authority to release Utrecht. Further, the undisputed facts establish that defendant Utrecht did not breach any duty (loyalty or otherwise) to Loanvest and met the standard of care in the representation. Lastly, the undisputed facts show that causation cannot be established in that defendant did not cause plaintiff to suffer non-speculative damages."
The court gave several reasons for granting the motion in favor of Wendel Rosen, among them that "Madow is judicially estopped [by reason of a September 2011 default judgment Madow took against South Bay in a Santa Clara County action in which the court at Madow's request found that South Bay was the manager of Loanvest] from denying that South Bay was Loanvest's lawful manager. Hence, the unjust enrichment and conversion claims fail in that payment for services rendered was lawful and just. Moreover, none of the complained conduct can be construed as wrongful or unjust so as to support the asserted claims—and even if construed as such they were covered by the litigation privilege."
Loanvest has timely appealed the judgments entered in favor of Utrecht and Wendel Rosen.
Discussion
1. Summary judgment was properly granted in favor of Utrecht
As indicated above, the trial court held that summary judgment in favor of Utrecht was required for several reasons. Since we agree that the order is supported by the first of these reasons, it is unnecessary to consider the others.
The terms of the May 3, 2013 settlement agreement between Loanvest and Utrecht unquestionably release the claim that Loanvest has asserted against Utrecht in the present action. Utrecht's separate statement of undisputed material facts in support of its summary judgment motion recited, "The settlement agreement and release entered into by Loanvest and the Utrecht firm provides" the terms as set forth above. The separate statement appropriately cites a declaration in the record to which the settlement agreement and release is attached as an exhibit. Loanvest's response reads as follows: "Undisputed that the fraudulent and highly unethical settlement agreement has been accurately quoted. Disputed that the agreement is enforceable." Loanvest thus acknowledges the existence of the agreement; its opposing separate statement cites no evidence to support its conclusory contention that the agreement is either unethical or unenforceable.
Elsewhere in the opposing separate statement Loanvest does dispute the assertedly undisputed fact that "Pursuant to the [May 1, 2013] settlement, Madow became the manager of Loanvest five days later, on May 6, 2013." In opposition to that asserted fact, Loanvest asserted that "Madow replaced South Bay as Loanvest manager as of January 14, 2013, if not sooner." In support, Loanvest cites documents supporting Madow's contention in the settled litigation that because of his purchase of a 70 percent membership interest he was entitled to elect, and at least by January 14, 2013, had elected, himself as manager of Loanvest, so that South Bay/Cresson allegedly had no authority to release Loanvest's claim against Utrecht when it purported to do so on May 3, 2013. However, Loanvest does not dispute that the underlying litigation in which he made that claim was settled on May 1, 2013. Under the settlement agreement, as quoted above, Madow was not to be appointed manager of Loanvest until five days after notice of the agreement, which was May 6, 2013. Thus, as the trial court implicitly held, South Bay remained the manager on May 3, 2016 when it entered the settlement agreement and release with Utrecht. While Madow may not have anticipated that South Bay would enter such an agreement during the five-day period following entry of the May 1 settlement, the terms of the settlement did not preclude South Bay from doing so. The entry of such an agreement is within the authority of the manager of a limited liability company, and no attempt has been made to set aside the May 3 settlement agreement and release.
Loanvest implicitly acknowledges that South Bay was the manager of Loanvest before Madow replaced it. Thus it is unnecessary for purposes of the Utrecht judgment to dwell upon the significance of Madow having obtained a default judgment against South Bay in a Santa Clara action in September 2011 finding that "South Bay is the Manager of [Loanvest]." It is also unnecessary to consider whether Madow's dismissal with prejudice of his cause of action seeking a declaration of the effectiveness of his purported June 13, 2011 removal of South Bay as the manager of Loanvest, as part of the May 1, 2013 settlement, establishes the invalidity of the purported removal under principles of retraxit or collateral estoppel.
Therefore, the trial court correctly held Loanvest's claim against Utrecht barred by the terms of the settlement agreement and release. Since the claim has been released, it is unnecessary to consider the merits of that claim and the other grounds on which the court granted summary judgment in favor of Utrecht.
2. Summary judgment was properly granted in favor of Wendel Rosen
Loanvest's sixth and seventh causes of action in its amended complaint allege conversion and "restitution" against Wendel Rosen based on the law firm's acceptance of "hundreds of thousands of dollars out of the cash proceeds of Loanvest I's sale of its Oakland property interest in payment for [Wendel Rosen's] representation of South Bay in the San Francisco Action." Loanvest does not dispute that Wendel Rosen was entitled to the amounts received as payment for the legal services it provided to South Bay, but "contends only that the Wendel bills were not its responsibility and should not have been paid with its assets."
In moving for summary judgment on these claims, Wendel Rosen asserted in its separate statement of undisputed material facts that Loanvest had "determined, based on consultation with Loanvest's separate counsel, that it was obligated to advance South Bay's costs of defense in the San Francisco action" and that "Loanvest and its counsel knew that sales proceeds would be used to pay South Bay's costs of defense and expressly consented to the payments to Wendel Rosen." In its opposing separate statement, Loanvest, though purporting to dispute the first of these statements, cited only Madow's assertions that he did "not believe that there is any legal basis upon which Loanvest I would bear contractual or other legal liability for legal fees and costs incurred by South Bay in the San Francisco action that were unrelated to its management of Loanvest I." Loanvest cited no evidence contradicting the sworn statements of both Cresson and Utrecht that in their view indemnity was required. In opposition to the contention that Loanvest consented to the payments, Loanvest responded: "Undisputed that Cresson's lawyer, Utrecht, facilitated Cresson's looting of 100% of the Loanvest I sales proceeds. Disputed that Loanvest I consented." Thus, the response implicitly confirms that Utrecht, as attorney for Loanvest, advised Cresson that the operating agreement obligated Loanvest to indemnify South Bay and that South Bay did consent to the payment to Wendel Rosen. The opposing separate statement cites no evidence in support of Loanvest's contention that Loanvest (with South Bay as manager) did not consent to the payments.
Madow's opinion is based on the allegations that he made in the San Francisco action that Cresson and South Bay breached fiduciary duties they owed to him and on the terms of the indemnification provision in the Loanvest operating agreement that excepted from Loanvest's indemnity obligation to South Bay liability for "gross negligence, willful misconduct or breach of fiduciary duty."
Aside from other questionable premises underlying Loanvest's claims against Wendel Rosen—such as that the money paid by South Bay to Wendel, because traceable to payments it received from Loanvest, constitutes a specific sum capable of identification supporting a conversion claim—the claims ultimately rest on the premise that South Bay was no longer the manager of Loanvest when Loanvest made the payments to South Bay that allegedly were passed on to Wendel Rosen. Because South Bay allegedly had previously been removed as manager of Loanvest by Madow, the argument goes, Loanvest did not in fact consent to the payment it made to South Bay for satisfaction of Wendel Rosen's legal bills, thus negating an essential element of Wendel Rosen's defense to the conversion claim, consent of the party whose property was allegedly converted. (E.g., Klett v. Security Acceptance Co. (1952) 38 Cal.2d 770, 789.) But among the reasons for which the trial court granted summary judgment is that "the undisputed facts show that the Santa Clara County judgment [obtained by Madow against South Bay based on the finding that South Bay was the manager of Loanvest] is collateral estoppel on the issue of whether South Bay was Loanvest's lawful manager. Lastly, Madow is judicially estopped from denying that South Bay was Loanvest's lawful manager." Loanvest's attempt to minimize the significance of Madow's prior position in the Santa Clara proceedings that South Bay was the manager of Loanvest, and the resulting default judgment procured against South Bay, that Madow's prior position "was not intended by Madow as a change of position and was the result of Madow's mistake in drafting the default judgment" does not negate application of judicial estoppel to Madow's change of position. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181.) Since South Bay was conclusively determined to have been the manager of Loanvest during the period in question, it follows that there was the necessary consent to the payment of Wendel Rosen's legal fees, undermining the cause of action for conversion.
See, for example, Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 284-285; Metropolitan Life Ins. Co. v. San Francisco Bank (1943) 58 Cal.App.2d 528.
Thus, Loanvest's conversion claim was properly summarily adjudicated in Wendel Rosen's favor. And since it is undisputed that the law firm was entitled to the fees for the services it performed, their retention of those fees involves no unjust enrichment and provides no basis for restitution.
Disposition
The judgments in favor of Utrecht and Wendel Rosen are affirmed.
Pollak, Acting P.J. We concur: Siggins, J.
Jenkins, J.